As chairman of the US Senate committee on commerce, science and transportation - under whose jurisdiction falls the aviation sub-committee - McCain is in a powerful position. He insists that he uses that power to promote the cause of the consumer and not to play favourites with any one airline.
Unusually, by US political standards, that non-favouritism extends to airlines on his home territory. Both America West and Southwest Airlines have major operations in Phoenix, Arizona - the Republican's state. But when those two airlines fought the seven majors last year against the introduction of a user fee system to replace the ticket tax, pointing out that the user fee would cost them millions of dollars, they found themselves on the opposite side of the campaign fence to their congressional representative.
Growing concerns
But the same US majors that found a friend in their fight for the the ticket tax to be phased out, then found themselves facing new legislation drafted by McCain aimed at their alleged anticompetitive practices. Amid growing concerns about increased air fares and charges of anticompetitive behaviour by the majors, McCain introduced the Aviation Competition Enhancement Act last year.
Among its more controversial proposals, the bill would mandate a slot allocation among new entrant and limited incumbent carriers. Where it was not possible to create slots because of capacity and noise restrictions, the US Department of Transportation would withdraw up to 10 per cent of the slots grandfathered to the majors in 1985 initially, then 5 per cent every two years, and auction them among new entrants and incumbents with limited capacity.
The majors can be expected to fight the bill vigorously this year, especially any suggestion of mandatory slot withdrawal. Already they are warning that the bill smacks of reregulation. But McCain denies the accusation vehemently and says he will fight equally hard for the the bill to become law. 'Study after study has shown that at airports where slots are restricted, air fares are higher. This is not a new tactic by the major airlines, but they have not got a valid argument,' he contends. 'The barriers of slot control were a regulatory act to start with. That's like saying you shouldn't give the Department of Justice the power to go after people who engage in anticompetitive behaviour. That's reregulation?'
'Wherever there is deregulation and competition, I am on their side. For example, on matters such as open skies, international aviation and support for the modernisation of the air traffic control system, I am in concert with their goals. They know me well; I am a deregulator and a free trader. They know exactly where I am coming from and I know where they are coming from. I hold no animosity towards them. Their jobs are to get a maximum profit; my job is to provide the best capability to average citizens to get from one place to another.'
Ultimately, says McCain, the crux of the problem lies with slot availability. 'The biggest problem is the inability of new airlines to get into the business. We must create an environment where new competition can get into the business, and that means slots have to be available. All through the seventies and eighties, we had new competitors coming in. Now we don't. That is the problem.'
That is the kind of candid talk that the airlines have come to expect from McCain and which they respect. What they fear is the dogged determination for which he is renowned when in pursuit of a cause. 'Once he has made up his mind, he will stick to it stubbornly, no matter what other information you might present to him,' says one airline's government affairs officer. 'You might want to criticise the stance, but never the zeal,' adds another lobbyist.
Competition certainly looms large in McCain's present field of view. Among the bill's other key points is a recommendation that priority be given by the Department of Transportation to applications by new entrants proposing service between a high density airport, such as New York/J FKennedy or Chicago/O'Hare, and a relatively small city.
It would also establish a 90-day deadline for the DOT to respond to complaints of predatory behaviour. McCain says he is absolutely convinced of the need for such action. The examples of cases of predatory behaviour in recent years have been 'numerous and compelling', says McCain. 'The major airlines have been a great impediment in that they have to some effect choked off new competition. I am glad the DOT is investigating those practices, but at the same time we also have to remove the anticompetition restrictions such as slot control at airports.'
Perimeter rule
The legislation would also authorise the DOT to grant exemptions from the perimeter rule that prohibits nonstop flights which exceed 1,250 miles into or out of Washington National Airport. The rule was originally established to help foster Washington's Dulles Airport, which is situated several miles further away from the heart of the city. But National's proximity to the city centre makes it the preferred airport for business travellers and government officials, so it tends to command higher air fares.
McCain believes exemptions to the perimeter rule could increase competition in multiple markets and, therefore, lower fares. McCain's long-running campaign to lift the perimeter rule has become something of a Nemesis for him as his opponents have repeatedly charged him with self-interest: the senator is unable to fly nonstop between Washington National and his home in Phoenix. 'It's always interesting that anonymous sources will accuse you of these kind of base motives,' McCain notes. 'After 16 years of not having flown nonstop between National and Phoenix, I think I can probably handle it for another 16 years.'
Consequently, McCain has proposed that Arizona be excluded from any exemptions and said that, if need be, he will undertake never to fly nonstop between the two cities, no matter what the new rules say.
The problem at National, says McCain, is that there exist 'very powerful' special interest groups in the neighbouring states of Virginia and Maryland, homes to Dulles and Baltimore-Washington International airports. 'That is unfortunate, but sooner or later, we will prevail on the perimeter rule because studies show clearly that it is anticompetitive. Some day these special interest groups will be awakened to the fact that it is their very citizens, who use these airports most, who will benefit because it will lower air fares. But that may be later rather than sooner,' says McCain.
Global thinking
McCain's concern for the consumer explains, he says, the caution he has exhibited towards the proposed American Airlines/British Airways alliance even though most observers - including, it seems, American's chief executive officer Robert Crandall - had expected him to be an outright supporter of the alliance.
'I have not opposed it, but I have been cautious in trying to determine all of its ramifications,' admits McCain, who says his chief concern lies in whether or not the alliance would impede progress towards an open skies agreement with the UK. 'But I believe it's not a lot different to the other alliances that exist and I also believe it should not stay in limbo for an extended time.'
The senator supports the concept of open skies, believing it promotes competition and is a natural extension of the global thinking that now permeates the airline industry. But he is concerned that the US, and the Federal Aviation Administration in particular, has not woken up to the implications of the global nature of the business. 'I am a complete and total supporter of open skies, but we need to put more visibility on the issue and maybe, over time, consider turning these responsibilities over to the US trade representatives because all of these issues are interconnected. You cannot have an aviation agreement that is not impacted by other trade agreements,' says McCain.
Similarly, McCain wants the FAA to think more globally. 'I don't think we understand the global nature of this business well enough at all,' he says. 'All facilities here that serve overseas flights will have to be examined in that light. We must also examine [alternative] places where these foreign service carriers might be interested.'
A stepping stone towards global awareness will come through the National Civil Aviation Review Commission's report, published at the end of 1997, which examines how the US civil aviation system is funded and also analyses commercial aviation safety (see box). McCain believes that reviewing and responding to the report's recommendations should be a top priority in 1998. 'I think we will have hearings pretty early in the year,' he says. 'We need to see what areas need to be addressed legislatively, but we probably need to look at it in two separate halves, otherwise it will be too much.'
McCain, who was a key instigator behind the forming of the commission, is supportive of its findings. He also agrees with its sense of urgency and its view that the US aviation system is '. . . headed down a path toward economic disaster and reduced safety', unless change begins now. 'It is a very important report with very serious and valuable information and recommendations,' comments McCain. 'Their prediction about increasing congestion within the system and the need for significant, perhaps even drastic, action gives an important message to Congress. Pretty soon, every day could be like the day before Thanksgiving.'
Generally, McCain is also optimistic that the funding-related recommendations, including increases in congressional budgets for airport capital funding, will be accepted even though some in Washington believe they will take a back seat to more vote-winning causes. But McCain believes that the need to modernise airports across the US has itself become a grass roots cause.
'I think we can get support because there is not a town or a city in America that does not want to get its airport upgraded. The question is, how will that money be spent and prioritised? Do you expand Hartsfield, Atlanta, or do you go to Columbus, Georgia? But we have got to modernise the system and there has got to be a better understanding that aviation is now a global industry.'
Viable airports
McCain draws a comparison between the airports of today and the railway stations of the turn of the century in their relative importance to the future of local communities. 'If you have a viable airport operation, then you will grow and prosper. If you don't, then it will be extremely difficult. So we have to learn how to develop airports as well as modernise the major ones.' The pressure to do both, however, will come from the American public, believes McCain.
Could 1998 be the year that the issues being championed by McCain finally get resolved? 'It's going to be a short legislative year, but a lot will depend on the pressures from Americans who have had to wait at an airport for four hours and paid $2,000 to fly to Boston from LA. So it's going to depend on the constituents to some degree, but the situation they are facing now will help. It will help absolutely.'
Clarion call
The National Civil Aviation Review Commission began work in April 1997 to produce two reports on the funding and safety of the UScommercial aviation system. The reports, prepared separately but published in a single document, were released last December and condemn the current state of affairs, particularly the present funding system.
The Federal Aviation Administration, according to the report, lacks the organisational, management and financial wherewithal to keep up with the dynamic aviation community. The commission warns that unless the FAA, Congress, the executive branch and the aviation community change the status quo, the system will '. . . succumb to gridlock.' Delays will skyrocket, the domestic economy will be impaired, the standing of the US in the global marketplace will be reduced, and there will be a long term deterioration in aviation safety.
While the report makes many sweeping recommendations for change, it also contains some specifics. Airport capital needs must be met, which means that the Airport Improvement Programme should receive a minimum of $2 billion annually over the next five years. In 1997 the AIP was hiked from $1.45 billion to $1.7 billion, which will make a further increase difficult to obtain in 1998.
The commission also wants to see the FAA's federal budget treatment changed to ensure that revenues from aviation users are spent only on aviation services and are shielded from discretionary budget caps. The FAA should become more performance based and control its operating costs better so that it can increase capital investments; it needs a cost accounting system. A chief operating officer should be appointed to manage the air traffic control system.
In summary, the commission says it offers its report as a 'clarion call' to action and innovation.
Source: Airline Business
